Dossier on the mortgage market

FINMA has repeatedly emphasised the growth of mortgage market risks in recent years. The reporting year was no different as FINMA drew attention to the ongoing growth of these risks, for example at the annual media conference of 4 April 2019, where the results of the 2018 extended mortgage stress test covering 18 banks were disclosed, and in its December Risk Monitor. The latter report highlighted investment properties, which merit a closer supervisory focus as they are particularly exposed, not least due to unprecedented vacancy levels.

The sharp rise in vacancy rates for investment properties, combined with the ongoing boom in construction activity, is exacerbating the risks in the Swiss real estate and mortgage market. Previous crises have shown that financial institutions which expand their activity in the late phase of an economic cycle are particularly exposed to the risks of an ensuing economic downturn.

The strong vacancy growth in residential investment properties and the sustained high level of construction have increased Swiss real estate market risks.

Persistently low interest rates also mean that investors still face a dearth of supposedly low-risk return opportunities, and investing in real estate therefore remains attractive.

Momentum in the Swiss mortgage market eased slightly in 2016, especially where owner-occupied residential properties were concerned.

In the low interest rate environment, monitoring and managing interest rate risks remains extremely important.

Price growth slowed slightly following the increase in the countercyclical buffer and the somewhat stricter rules on amortisation and central parameters of self-regulation. However, imbalances and the factors driving them persist.

Despite self-regulatory measures and the countercyclical capital buffer, real estate prices and mortgage volumes once again rose in 2013 – somewhat more slowly than before, but still faster than gross domestic product.